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Problem 3 Easy Difficulty

The Oxford Dictionary defines the word nominal as a value that is “stated or expressed but not necessarily corresponding exactly to the real value."$^{[18]}$ Develop a reasonable argument for why the term nominal rate is used to describe the annual percentage rate of an investment account that compounds interest.

Answer

nominal.

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Video Transcript

So why is what nominal used but the interest rates of an account with compound interest? This is a pretty open in question, but my answer would be It is because nominal does not necessarily correspond to the actual value as perfect a dictionary definition, just a CZ. The A PR oven accounts does not necessarily correspond to the actual interest earns. It does not be absolute amount of value gains the percentage of a current value but his gains. So it's matches with definition phenomenal.